My Primer: Economics 101

This article is part of a larger discussion of money, sex and power. In an earlier installment in this series, I discussed the Money Psychology of the western world. In this article I want to discuss a few issues associated with survivability and sustainability. We will return to the issue of money and the western psyche in a future article.

As part of my upbringing, I was taught certain economic principles. From these principles, handed down generation upon generation, it was felt that any of us could build a life for ourselves that was survivable. Survival was the mantra of our ancestral legacies. We had survived the Middle Passage, the Trail of Tears and the Potato Famine, and so our economic strategy was all about survivability.

I thought I should at least share the economic principles that shaped my life as part and parcel of my general treatise on sex, money and power. Because any strategy that purports to bring about economic sustainability, should at the very least be built on sound strategies for survival. And in many ways, individual strategies for survival may be exactly the techniques we should study in developing new strategies that support the survival of local economies.

In this article, I discuss four economic principles that were handed down to me by my family and community. An upcoming article will focus on some of the issues surrounding the living wage movement. In future articles, I hope to discuss other ideas that may be helpful in building economic sustainability within our communities and within ourselves.

Housing & Transportation
The first principle of economic survival handed down to me was that housing and transportation to work were more important than food. This meant that in a situation where money was scarce, we were to pay our rent or mortgage first. Secondly, make sure you always had a way to get to work. That meant we put aside bus fare, gas money and ride share fees. Then and only then, if anything was left over, that was used to buy food. The underlying message was always preserve your home and a way to earn money. The view was that you could always get food in an emergency from family, neighbors and even the church. (Jobs were also our source of health insurance.)

As a child, there were many times we went without electricity, water and even at times food. But we never lost our home. And my parents always could find a way to get to work even if it meant begging for bones to make soup or standing in lines to get government cheese. Even when their jobs were an hour away, they and their co-workers set up a ride share system so everyone could at least get to work.

Food & Meals
The second principle was to never buy food already prepared if you can make yourself. And no we did not make everything ourselves at home in some kind of stoic fashion. In the fifties and sixties, this rule simply meant that we did not buy ready made french fries, hamburger patties or packaged rice mixes. We cut our own potatoes, formed our own patties and mixed flavorings into our plain rice. And yes when times were flush, we bought instant oatmeal and cake mixes in a box. But for the most part, if we knew how to make it, we made it ourselves. The second principle was not as stringent as the first, but the reality of how it was applied allowed the adults to teach their children how to cook, how to plan meals and how to buy in bulk.

Budgeting
The third principle was lifted somewhat from the world around us. In the sixties and seventies the general guideline was that housing costs, rent or mortgage, should be no more than a weeks pay. If you earned $250 a week, then you should pay no more than $250 for housing a month. And every week you set aside one quarter of that amount. Using our example, we would need to put aside $62.50 weekly. This methodology was then naturally expanded to include all of your expenses. So budgeting consisted of adding together monthly housing and transportation costs as well as food, utilities, and phone service and dividing by four to produce the amount set aside each payday. The third principle was that you included yourself in that weekly figure. So if you routinely had money left each week after accounting for all your set asides, a portion of that money went into savings.

My first union job, for example, paid me $140 a week, and I routinely put $10 into savings each week. As my income rose, so did my contribution. The third principle was intended to produce long-term savings that would be available in an emergency. The goal was to save at least a month, preferably three months, of expenses. This was especially helpful in case you were out on strike or were laid off – occurrences that happened often in my personal work history.

Service & Charity
Growing up, my family was usually the recipient of charity more than contributors. But as we moved from subsistence living, we came up against community standards for both service and charity. The community standard I inherited was that you contributed the equivalent of 40 hours toward service and charity annually. It could be a week’s pay or 40 hours of service, or some equivalent combination. And these were the minimum standards. There were also maximum standards; I think it was no more than a four times that amount, which is roughly equivalent to a month’s pay.

My parents gave primarily to the United Way through the combined federal campaign. I gave money directly to groups who shared my values or who were working in areas I felt strongly about politically. And I gave substantial contributions to my UU church. I also gave of my time toward political, spiritual and community priorities. All in all I gave far more than a month’s equivalent of pay and/or hours. I aligned my money and my time with those areas that represented my priorities. However, this is a fourth principle area. I did all of this without sacrificing my home, transportation, food, or my savings. Whatever your priorities, interests or political leanings – they essentially came after satisfying the first three principles.

Beyond Surviving
These four economic principles, if followed in the correct order, would ensure the economic survival of an individual or a single family. Sustainability requires that we look beyond ourselves and into the realm of interdependence, viewing economic survivability at a community or bioregion level.

Sustainability requires looking at the economics of not just what we pay out to institutions such the bank, grocery store, subway system or public utilities. We also need to look at how our money pays into the local economy, i.e. local merchants and local service providers – in short, how we pay our neighbors.

Sustainability also needs to provide guidance on how our fourth principle priorities reflect our values and vision. And finally, principles of sustainability ought to help us build for the future, not some vague, namby-pamby, rose colored, patchouli scented version, but help us plan for the down to earth, nuts and bolts of building a new economy.

What principles do you use to assure survivability? What are some principles that might help us in building a sustainable economy? In my next article, I will discuss one such principle, living wages.

I didn't grow up with good budgetary survival skills. The hard-earned lessons of my depression-era grandparents didn't seem to trickle-down (heh) to their progeny, and I witnessed much paycheck-to-paycheck living. It's been a long, slow learning process to prioritize and budget. I used to assume that others were much better at managing finances, but I'll get surprised from time to time. For example, I'll mention to my SO that money is tight for the remainder of a month, and he'll assume I'm broke. I have to explain to him that I'm not broke, it's that all my bills are paid, money's been put into savings, and there's simply no extra for non-essentials.

I still have a ways to go in tightening up personal discipline, but I've got a good start with personal retirement investments and a savings account. I read in the business section of the newspaper on how few people have pensions or savings for retirement or emergencies, and it makes me wonder what kinds of shifts we're going to be forced to make in the next 20-30 years.

Anyhow, alot of personal blathering in an effort to say that your article made me think and review where I'm at now, and wonder at how best to prepare for the future. Looking forward to reading more!

I blogged a while back about how even "middle class" families are now getting sucked into payday-loan scams. Americans are not nearly as special as we think we are. We're now living beyond our means on both a personal and a national level. That can't go on. We're not entitled to use more than our fair share of the world's resources. It's foolish to keep borrowing our national debt from China. Nor does it make any sense to buy things like DVDs, restaurant meals, or new clothes on credit. We've GOT to live a bit below our means so we can save for an emergency. Most financial counselors suggeste at least six months of net pay and I'd argue in these times for twice that. It worries me that so many Pagans ignore these realities.

1. Stop acquiring it. Each time we buy on credit, we're buying debt. Think of the thing you buy as the freebie that they give you in order to entice you to buy more debt. It's one thing to borrow money to pay for college, or a home, or even, when you're first starting out, a car. But it's crazy to buy debt in order to get a new sweater, or a restaurant meal, or a DVD.

2. List all debts. How much do you owe to each lender? What is the interest rate on each debt?

3. Pick the highest interest debt and, while paying the minimum on all other debts, pay more than the minimum on this debt. Do this until it is paid off. Then, start on the debt with the next-highest interest.

4. People think they can't find any money to pay more than the minimum, but they can work a second job until they get out of debt. They can sell a lot of the stuff they went into debt for: the plasma screen tv, the DVDs, the big new SUV.

5. The Bush economy is all about keeping poor people poor, making the middle class disappear, and getting and keeping all of us in debt. New bankruptcy laws now ensure that you can NEVER write off consumer debt. It's an act of political resistance to refuse to allow them to do this to us.

Anyway, just my two cents. What's truly sad is that you can graduate from high school in America and not know how to stay out of debt.